Nike ‘doing it’ well in Japan

When sporting goods giant Nike, Inc. opened its Niketown superstore in New York last November, the company anticipated that about 100 journalists would attend the opening day ceremonies.

But to organizers’ surprise, over 150 members of the media showed up and — even more startling — the 50 extra journalists were almost exclusively Japanese. This is the story that Phil Knight, chief executive officer of Nike, Inc., relates when explaining the impact the Japanese market has had on the athletic goods company, and why Tokyo is the most natural home for the next Niketown.

“Japan is our most important market outside of the United States,” Knight said in an interview June 10 with Toshiaki Ogasawara, chairman and publisher of The Japan Times. “Because we expect that by the end of this decade over 50 percent of our business will be in foreign markets, Japan is key to Nike’s future growth,” Knight said.

Nike is already executing plans for a Customer Service Center in Chiba Prefecture that will provide support exclusively for customers in Japan. In addition, Knight has been looking at possible sites for a Tokyo Niketown, though he is emphatic that Nike does not have any definite building plans for another of the popular superstores. But he does concede that the first Niketown outside of the U.S. will almost certainly be in Japan.

Nike, which in 1972 made less than $3 million, has reported sales of $9.2 billion for the 1996 business year and has experienced growth rates of between 70 percent and 80 percent since 1994. And although these profits have already made the company a staggering success worldwide, Knight said that he aims to increase sales to $13 billion by 2000.

He points out that to remain on top in the highly competitive athletic goods market, Nike must continue to be as innovative and growth-oriented, as they have been in entering the athletic apparel and accessories markets. One of Knight’s most important innovations came to him as a business school student at Stanford University. He wrote a paper describing the importance of outsourcing production abroad, specifically in Asia.

Over the past 25 years, Nike has followed Knight’s original idea and manufactured its shoes in factories in Japan, Korea, Taiwan and most recently in Vietnam. However, this strategy, which has enabled Nike to produce its shoes very cheaply while maintaining a high standard of quality, has brought the company continuing difficulties.

Most recently, the American media has focused on Vietnamese workers at Nike factories who earn $40 a month and are allegedly forced to work in very poor conditions. Some of these workers, who are predominately women, have reported that they are physically punished if they make mistakes or do not finish the quota of shoes demanded each day.

“I think that clearly we’ve taken a lot of criticism in the media for (the labor issue), but I think it’s really based on lack of understanding of how the world and the economy works, especially by Americans,” Knight said. “If you look at Nike’s sourcing and production, you will see that the national economies where Nike has contracted factories have grown enormously.

“Four dollars a day was the salary of a Japanese worker when Nike first started in Japan,” Knight said. “Nobody is feeling sorry for the Japanese worker, or the Taiwanese, or the Korean worker now. Twelve dollars a week may seem like very little, but it (comes to) twice the per capita gross national product in Vietnam,” he added. “We don’t feel bad about what we are doing.”